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Reforming the over-the-counter derivatives market: what’s to be gained?

Author

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  • Kent Cherny
  • Ben R. Craig

Abstract

While derivative financial instruments have made the hedging and exchange of risk more efficient, the recent crisis showed that they also pose a substantial threat to financial stability in times of systemic turmoil. Underlying much of this threat is the lack of transparent reporting in the over-the-counter market for these instruments. This Commentary discusses the advantages of one solution to the transparency proble: moving the settlement or trading of derivatives to exchanges or clearinghouses.

Suggested Citation

  • Kent Cherny & Ben R. Craig, 2010. "Reforming the over-the-counter derivatives market: what’s to be gained?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Jul.
    • Handle: RePEc:fip:fedcec:y:2010:i:jul7:n:2010-6
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    File URL: https://www.clevelandfed.org/publications/economic-commentary/2010/ec-201006-reforming-the-over-the-counter-derivatives-market-whats-to-be-gained
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